3 reasons why a balance transfer may be your next smart financial move

Feb 03, 2021Paying Off Debt

What is a balance transfer and will I benefit from one? Most likely! But take a closer look to determine if a balance transfer will be the right move for you.

Balance transfers allow you to transfer the debt from one (or more) credit card(s) to a new credit card. Consumers often use balance transfers as a way to take advantage of a much lower interest rate or consolidate one or more credit cards into one payment.  

Let’s take a look at the benefits of a balance transfer.

Take advantage of a lower interest rate.

If you currently have a credit card with a high interest rate, this can be one of the biggest advantages of a credit card balance transfer. It’s a great way to pay down your debt faster by lowering the total amount you are paying in interest.

Consolidate high interest debt.

If you’re finding yourself overwhelmed with multiple credit card payments and want to simplify your finances, a balance transfer may be a good place to start. You will not only enjoy a lower interest rate, but you will also have only one payment, allowing you to focus on paying off your debt more effectively.   

Improve credit utilization ratio (overall improving your credit score).

Moving multiple balances to a single credit card could decrease your overall credit utilization ratio, or percentage of available credit you're using. The lower your credit utilization, the better, because a low rate shows lenders you're not racking up debt that you can't repay. Experts recommend keeping your credit utilization below 30%, which means using no more than 30% of your credit limit at any point.

If you have multiple credit accounts but move their balances to a single account through a balance transfer, your previous accounts' utilization rates will appear as 0% on your credit report. That could lower your average utilization.

Now that we’ve reviewed the benefits, let’s take a look at a few things you should be mindful of when you balance transfer.

Balance transfer fees

Look for no balance transfer fees. You don’t want to pay a fee so don’t even mess with the financial institutions who do!

Joining fees

Even if the rate is dynamite, there is always a competitor who will likely offer something comparable. Don’t bother with doing a balance transfer with a financial institution who enforces a joining fee.

Credit score

If you have a great credit score, usually 720+, you shouldn’t have any problem getting a top-tier rate; however, if you have a lower score, your credit score will be the most important factor in determining your rate.

Low rate

The rate you’re offered is tied to your credit score. The lower the score, the better, but look for 0% promotional rates, or rates that fall below 5%.


Your term, or length in which a certain rate is held, is a major component and factor in assisting with paying down debt. With promotional balance transfers there is a term associated with the special, so be sure to select an offer that fits with your financial goals. For some people, they may be motivated by a shorter term, encouraging them to get to work and pay down debt! While other consumers may be motivated by a longer term, allowing them to pay off smaller chunks of debt at a time.

Wherever you’re at in your financial journey, we’ve got a team of experts ready to help you! Speak with a Certified Financial Coach to create a game plan to pay off debt and create a life you love.

Speak with a Coach

Annie Jacobs

Annie Jacobs

Integrated Marketing Specialist | HAPO Community Credit Union



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Balance Transfer / Credit Card / Debt / Visa